Zillow Announces Trulia Acquisition

by Victor Lund on July 28, 2014

Two of America’s third party real estate portals have entered into a definitive agreement for Zillow (Z) to purchase Trulia (TRLA) for $3.5 billion in stock-for-stock trade. The Board of Directors of both companies have agreed to the transaction which represents a 25 percent premium to Trulia Stockholders, based on Trulia’s closing price on Friday, July 25, 2014. The transaction will now face regulatory approval. Goldman, Sachs & Co. brokered the transaction. Trulia CEO Pete Flint will retain that title, join the Zillow Board of Directors along with one other designee, and will remain the leader of the Trulia.com business unit. He will report directly to Zillow CEO, Spencer Rascoff.

The two companies will carry on doing business as usual. The strategy for the merger outlined five key benefits for the companies:

Faster Innovation – Combining development resources will allow the companies to accelerate innovation for consumers and professionals.

Broader Distribution – Home sellers and their agents, brokerages, and participating MLSs will benefit from seamless free distribution of listings across even more platforms to reach an even larger audience of consumers.

Enhanced Value and ROI for Advertisers – The companies expect to offer shared services, marketing platforms for advertisers, enhance agent productivity and marketing, and deliver greater return on their investment.

Corporate Cost Savings – By operating independent consumer brands though one corporation, the companies expect to realize synergies to improve operational efficiency over the long-term. By 2016, management expects to achieve at least $100 million in annualized cost savings.

There were a few interesting data points in the press release. The first was that the advertising universe is a $12 billion dollar market – a remarkable number reported by Borrell Associates produced by a survey response. The second is that these companies combine to attract just 4 percent of that online advertising buy. Today, there is still more money being spent on newspapers than the combined online spend across all online portals.

This represents a healthy strategy for both companies. It is anticipated that the combined companies will be able to do things like: leverage the same data management processes, same publisher agreements, same sales people, same marketing, same billing, etc. For brokers and agents using these services, it will be much easier to manage one relationship rather than two. Unfortunately, it may be six months to a year before any of the fusion between these companies occurs (regulatory approval time).

No doubt, real estate agents, brokers, franchises, and MLSs are set back on their respective heels by this announcement. The ever-present fear of disintermediation shall rear its ugly head and roar from the mountaintops. That is really too bad, because this acquisition really does not change a thing. Everyone has the same choices today as they had yesterday and will have tomorrow. In this case, the only reason why size matters is that these two sites will become more effective as a combined entity than separate entities.

WAV Group has clients that refuse to do business with these entities. We also have clients who buy and leverage every possible service these companies have available. Our service has been, and will continue to be to support our clients at developing strategies that work for their business. We study and measure the effectiveness of online marketing more deeply than any other entity in the universe. At this point, there is nothing that needs to be done to alter your online marketing strategy until the deal closes and changes from the fusion of these two companies begin to avail themselves.

In the meantime, stick to your knitting. Continue to elevate online marketing performance, especially in the area of lead responsiveness and conversion. Continue to develop the adoption of consumer facing technologies that support the consumer in researching and trading real estate with their agent. Continue to train agents on how to use tools to manage customers from acquisition through closing, and develop client-for-life solutions.

If you don’t do these things, other firms are far more likely to eat your lunch. We stand at the ready to help any way that we can.